UAE E-Commerce logistics is aiming to reach AED 3.0 Bn Market by 2027. Will it be able to achieve it?: Ken Research
The global e-commerce market has grown dramatically over the past years, transforming the dynamics of consumer behavior and business models in various industries. In the retail sector, the global e-commerce market is expected to continue growing between 2022 and 2027. Escalation in the number of smartphones in the country, high consumer confidence, changing consumer preferences, etc. have augmented the growth of e-commerce leading to surging demand for e-commerce logistics as well in the country. The e-commerce industry in the country is not limited to retail, several industries have demonstrated an increase in e-commerce volume shares such as entertainment, travel services, and airlines.
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1. E-Commerce Logistics Players in UAE delivered ~60.0 Mn Orders in 2020, growing due to high internet penetration & Smartphone users.
9.98 million people in the UAE are internet users in 2022, which represents 99.01% of the total population. UAE’s smartphone users make up a total of 9.80 million and they spend around 4 hours and 35 minutes on the internet. This internet is used for shopping, travel, entertainment and a variety of other reasons. Due to people having access to fast internet services and high rate of smart phone users in the country, more and more orders were placed. This lead to the millions of orders placed, especially during the pandemic.
2. Amazon, Noon & Namshi are highly preferred for online shopping owing to large variety & better quality of products.
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In the last 5 years, e-commerce companies like Souq.com and Namshi have exploded in popularity. The ease of online payments through other applications have made people more fond of online payments for e-commerce, thus increasing internet retail by 40%. Amazon’s acquisition of Souq.com for $580 million paved the way for the American technology giant’s entry into the MENA Region in 2017. Moreover, marketplaces such as Amazon (formerly Souq), Carrefour UAE, Noon, Jollychic and Farfetch are poised to continue to put pressure on traditional brick-and-mortar stores due to strong digital infrastructure and improved trust in these big e-commerce players.
3. Emiratis still prefer COD over Prepaid Shipments owing to Lack of Trust but the trend is rapidly changing owing to increasing adoption of contactless payment options.
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E-Commerce accounts for a bigger share of total UAE card payment transaction values in 2020, compared to pre-pandemic predictions. During Covid, there has been an increasing interest shown towards digital payments but only on the trusted websites. Most of the SMEs still offer COD as the only payment mode in UAE. Post Covid outlook is that 43% will continue using contactless payments and 48% will opt for digital payments online over COD for future e-commerce purchases. Furthermore, government initiatives for cashless transactions have created familiarity with the process of E-Payments and facilitating availability of channels. These factors are giving a major boost to Ecommerce Industry.
4. Major Warehousing Concentration Lying in Dubai Emirate owing to presence of major Seaports, Airports & Retailers in the region.
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Companies such as DHL, UPS and FedEx have penetrated the local market through effective collaborations with domestic companies. These companies have built warehouses to cater to the cross border shipments. Moreover, warehouses are concentrated mainly in Dubai region with few warehouses located in Abu Dhabi, Ajman & Sharjah.
The country’s recent efforts at economic diversification to decrease reliance on oil exports’ revenues have proven successful in building and maintaining a strong economic ecosystem, which has driven investments and created job opportunities, thus attracting global talents will play a big role in achieving the AED 3 Bn mark by 2027. Furthermore, fast adoption and innovation, has enabled the UAE’s e-commerce growth. Moreover, the e-commerce industry in the country is not limited to retail, several industries have demonstrated an increase in e-commerce volume shares such as entertainment, travel services, and airlines. All these factors will likely contribute in reaching AED 3 Bn mark by 2027.
